Why do people still persist with annual performance reviews?

I am yet to meet someone who actually likes performing annual performance reviews.  There is a whole heap of literature out there explaining why the traditional annual performance review with your direct manager is a poor way to handle staff performance and yet it still seems to be a standard at so many organizations.

What’s wrong with annual performance reviews?

First of all let’s start with the frequency.  Would you only talk to your children once a year about their behavior?  No, I didn’t think so.  So why do it with employees?  Is an annual review really going to encompass everything that you did over the entire 12 months, or is the focus really only going to be on the last two or three months?  Discussing performance with employees should happen weekly, fortnightly or at the very least monthly.

Performance reviews are generally conducted by your direct manager, who more often than not, are not trained in human resources management and how to conduct objective appraisals and perhaps resent having to give up time out of their busy schedule to firstly monitor and record the performance of each of their employees and sit through the review process.  Since the appraisal process is generally a subjective measure, it is usually subject to bias, whether it be gender, race or even office politics.  A manager may wish to avoid conflict so perhaps may add a leniency bias or may insert a centrality bias where employees are generally clustered in the middle of the rating scale.  While performance appraisal can be adapted to look at purely objective goals, these goals generally only take into account a small subset of the employee’s tasks.  If these goals and appraisal are directly linked to a financial reward, the employee may simply focus on achieving those goals to the detriment of the rest of their tasks.

Often performance management and appraisal is directly linked to financial reward such as bonuses or pay rises, however there is often no budget for bonuses to be paid to all employees, leading to the necessary ranking of employees.  This can then lead to a competitive, individualistic culture within the organization that can hamper cooperation and teamwork.  If an employee receives a negative appraisal and they don’t believe that the process was fair, it can lead to mistrust between the employee and their manager thereby reducing their motivation, leading to the appraisal becoming self-fulfilling.

Is there a better way to manage performance?

Managers still need a way to manage the performance of employees and setting objectives and training goals with employees can increase motivation and job satisfaction.  As with all relationships, the best way to manage it is to have regular, open and honest discussion.  While filling out forms once a year may still be a requirement, performance management must be a continuous process.

360-degree reviews where feedback is gathered from multiple sources: managers, peers, subordinates and customers, while perhaps still subject to individual biases, should be combined to give a more objective assessment.  Employees often have more faith in the process and believe they are treated more fairly if they are given the opportunity to contribute and discuss their performance, rather than simply being lectured to.

Performance management should be a positive experience for both managers and employees.  By working on it as a mutual relationship, it can be beneficial to both the organization and its employees.  The organization will benefit when employee goals are aligned with that of the business and employees will remain motivated and engaged.

Does your organization still do a traditional annual performance review?  As a CIO or IT manager do you even have a say in performance management or is it mandated by HR policies?  Please leave a comment below or contact me on twitter @theroadtocio